Authors libby rittenberg 402
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substitution (MRS) between the two goods is equal to the ratio of
prices of the two goods. This means that the rate at which the
consumer is willing to exchange one good for another equals the
rate at which the goods can be exchanged in the market.
Figure 7.18
[1] Limiting the situation to two goods allows us to show the problem
graphically. By stating the problem of utility maximization with equations, we
could extend the analysis to any number of goods and services.
7.4 Review and Practice
Summary
In this chapter we have examined the model of utility-maximizing
behavior. Economists assume that consumers make choices consistent
with the objective of achieving the maximum total utility possible for a
given budget constraint.
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org
402
